How to Blend Company Cultures in a Merger
This story appears in the April 2011 issue of Entrepreneur. Subscribe »
Q: I'm considering acquiring a competitor. What do I need to know about merging two cultures?
A: We bow to you for thinking about this issue ahead of time. Approximately 65 percent of mergers and acquisitions fail. "The No. 1 reason is a poorly planned and managed integration," says Alan J. Smith, CEO of San Francisco-based Bay Pacific Group, an M&A consulting firm. "Executives underestimate the challenge involved in successfully blending corporate cultures."
Don't believe it? Look what happened when behemoths Daimler-Benz and Chrysler tried to get together. It was called a "merger of equals," but one company always dominates, Smith says.
"In this case it was Daimler who openly imposed its culture on Chrysler," he says. "The failure in properly handling the cultural issues was considered the main reason for the failure."
But culture blending is usually an afterthought, Smith says. "Any company considering acquiring another company should carefully consider the risks involved in combining different cultures before they take the leap," he says. "Once they are comfortable they can successfully blend the companies, they should start the process as soon as practical."
And "as soon as practical" means now. No sense letting the fear factor take hold. "The danger time in a corporate culture clash is in the very beginning when employees on both sides feel threatened by the combination," he says. "By acknowledging its presence early on and educating employees as to its dynamics, people will be better prepared to appreciate differences that may help build a stronger organization in the long run."
Once you do let employees in on the deal, keep them involved in the process. "Keeping the employees informed on a regular basis on the progress of the combination is important," Smith says. "Problems and opportunities should be identified, shared and discussed with employees on a regular basis allowing for employee input. Employees need to feel involved."
If your company is on the smaller side, you need to pay even closer attention to the blend. We know, your size means you don't think you can devote the resources to dealing with culture issues. Sorry, but that excuse will sound pretty flimsy when the deal--or yes, your company--implodes.
"Because of the more personal nature of these firms," Smith says, "the consequences of not dealing effectively with cultural integration issues can be devastating."